A few weeks after the murder of George Floyd by Minneapolis police one year ago, progressive Democrats in Connecticut demanded massive new investments in poor Black and Latinx communities.
What they got was an overhaul of police accountability rules — but almost no dollars. Neither the Black Lives Matter movement nor the ravages of the coronavirus pandemic were enough to overcome moderate Democrats’ and Republicans’ opposition to the tax hikes needed to sustain big spending increases in education, health care, housing and other core services.
But with this week’s anniversary of Floyd’s death, progressives find themselves embroiled in a far more intense battle for at least a down-payment on these investments.
And while fiscal moderates and conservatives — led by Gov. Ned Lamont — still oppose initiatives paid for with new taxes, the battle for racial equity and economic fairness has expanded on many fronts.
With two weeks left in the 2021 legislative sessions, proposed tax breaks for the poor and middle class and the struggling restaurant industry — effectively paid for by hikes on Connecticut’s wealthiest households and major corporations — remain very much in play.
Municipalities in general, and cash-strapped cities in particular, are in line to receive significant new dollars, while debt-free community college and a Medicaid expansion remain top priorities.
And while a radical plan to carve hundreds of millions of dollars out of the budget permanently for urban investments is deemed by many a political long-shot, it sparked a compromise proposal that could trigger major new borrowing to assist Connecticut’s poorest communities.
“Revenue is required in order to get to equity,” said Sen. Gary Winfield, D-New Haven, a member of both the Black and Puerto Rican Caucus and the budget-writing Appropriations Committee.
And while the George Floyd tragedy and the pandemic drew attention to longstanding racial inequality, they didn’t create them.
“This thing that we are calling a crisis is the norm,” Winfield said earlier this spring.
Winfield was one of several progressive Democratic senators on the Capitol lawn on June 19 last year arguing that police reforms alone were insufficient.
They say commitment to racial justice means breaking down “entrenched” disparities in education, health care, housing and other core services — problems that many officials say can’t be fixed without a major investment in public funding.
But fiscal moderates feared the state’s economy could be crippled for years because of the pandemic. And while the stock market was booming and state reserves actually began a boom last summer that continues now, a decision was made that Connecticut couldn’t afford big investments.
The bill that was enacted last July focused primarily on police accountability. According to nonpartisan analysts, that bill cost the state — including administrative and fringe benefit expenses spread over three agencies — less than $1.3 million.
In other words, that’s 1/156th of 1% of the adopted budget’s General Fund.
Lamont: ‘We don’t need more taxes’
But the governor, a Greenwich businessman, says now Connecticut is poised to avoid tax hikes and help the poor — and still keep lots of money socked away for a rainy day.
The governor is referring to more than $6 billion in new federal relief coming to state and municipal governments and to local school districts via the American Rescue Plan Act.
That same legislation also temporarily upgraded the child tax credit within the federal income tax system. It will give families between $3,000 and $3,600 per child, this year. Normally the limit is $2,000 per child.
And given all of this help, the governor says, the best thing Connecticut can do to help its economy recover is avoid state tax increases, of any kind.
“I’ve always said, we don’t need more taxes, we need more taxpayers,” Lamont has said on several occasions this spring.
The numbers support the governor in one sense. The federal dollars coming Connecticut’s way over between now and 2024 appear to be enough to balance the state’s budget.
Analysts last February projected a built-in shortfall of more than $2.5 billion in the next two-year budget. The $6 billion-plus coming via the rescue plan includes a $2.8 billion payment direct to the state’s coffers — more than enough to close the shortfall.
“We look forward to negotiating a budget, starting this week, that reflects the priorities of supporting our state’s most critical needs, maintaining fiscal responsibility and addressing equity,” said Max Reiss, Lamont’s communications director.
The governor also has allies in the struggle to avoid tax increases on any groups.
“Generating more money than we can spend is unnecessary and irresponsible when people have lost their jobs or been furloughed because of the pandemic.” said Rep. Chris Ziogas, D-Bristol, a member of the House Moderate Democratic Caucus.
Leaders of the Republican minorities in the House and Senate also recently said they would back Lamont if he vetoed a budget heavy on tax hikes.
“The Republicans can sustain a veto in the House,” said House Minority Leader Vincent J. Candelora, R-North Branford. “The Democrats seem very clear that that’s the direction they want to go. So I think that it would probably behoove the governor to bring us in the room.”
Progressives: Federal aid won’t fix everything
But critics counter that it’s ridiculous to suggest temporary federal dollars alone can undo the financial carnage induced by the coronavirus — let alone make a serious dent in more than a century of racial inequity in education, health care and economic opportunity.
“That’s why we’re here today in 2021 with the same issues we had in 1968,” said Sen. Douglas McCrory, D-Hartford, a member of the Black and Puerto Rican Caucus.
The University of Connecticut’s economic think-tank urged state officials earlier this month to spend every single new federal dollar assisting businesses, schools and human services to counter the coronavirus — and argued that the state should crack open its own piggy bank to balance the next budget.
The state has more than $3 billion in its rainy day fund and expects to close the fiscal year on June 30 with another $1.5 billion left over. Lamont says Connecticut should hang onto that $3 billion and put this fiscal year’s leftovers into its cash-starved pension funds.
“We’re going to put this [federal money] under the mattress for a rainy day?” said economist Fred Carstensen, who heads the Connecticut Center for Economic Analysis. “Excuse me, this is a rainy day.”
And meanwhile, Connecticut’s state and municipal tax system — which already leans most heavily on the poor and middle class — has been taking an increasingly heavy toll.
A 2014 state-sponsored analysis found the poorest people in Connecticut in terms of adjusted gross income — about 725,000 filers earning up to $48,000 per year — effectively spent 23.6% of their pay on state and local taxes in 2011.
By comparison, the middle-class paid about 13%, while the top 10% of earners paid 10% and the top 1% paid about 7.5%.
Meanwhile, one state income tax credit that distributed more than $370 million to middle-income households a decade ago to offset local property tax bills now sends back just over $50 million.
And the state Earned Income Tax Credit for the working poor, valued at 30% of the federal EITC when adopted in 2011, now stands at 23%.
“We can’t pretend that things are normal when we have the equivalent of a four or five alarm fire going on in many of our communities,” said Senate President Pro Tem Martin M. Looney, D-New Haven.
The rescue plan also includes an expanded child tax credit within the federal income tax that will deliver $300 per-child-per-month, starting in July, to many low- and middle-income households.
But Rep. Sean Scanlon, D-Guilford, who is spearheading a push to create child credit within the state income tax, said it might be feasible to delay his proposal for a year or two, but it remains essential in the long run.
Lamont has argued since he took office in January 2019 that raising state taxes on Connecticut’s wealthy, for any purpose, would cause them to flee the state.
Have CT’s rich gotten richer since the pandemic began?
But progressives have pushed back hard this year, arguing the wealthy have fared much better than any other segment of Connecticut since the coronavirus began.
The Recovery For All Coalition, a group of labor and faith-based organizations and progressive legislators, released a report last week that Connecticut’s billionaires amassed $12.6 billion in new wealth since the pandemic started.
The Dow Jones Industrial Average closed Tuesday at 34,312 points, 32% higher than it finished on March 4, 2020 — just before the pandemic struck Connecticut.
“The unprecedented wealth amassed by billionaires and big corporations during COVID provides Connecticut a rare opportunity to raise the kind of progressive revenue and address the systemic burden born by 90% of our residents, a real down payment that is required to address real equity in Connecticut,” said Rep. Anne Hughes, D-Easton, co-chair of the House Progressive Democratic Caucus.
Lamont’s chief critic may be Scanlon’s fellow co-chair on the Finance Committee, Sen. John Fonfara, D-Hartford.
Fonfara proposed two state income tax surcharges on wealthy households and also backed a new digital media ads tax on online giants like Google and Facebook.
The Hartford Democrat also proposed using these increases in part to fund state income tax breaks for the poor but also to channel hundreds of millions of dollars annually to a fund — outside of the traditional budget — to invest in programs and capital projects in the state’s poorest cities.
“The governor is a Democrat, and I think it’s time to back up that designation, that moniker, if you will, with substance,” Fonfara said earlier this spring after the governor said he wouldn’t sign a budget with the tax increases the Finance Committee had endorsed.
And while sources say that proposal has an uphill struggle, it sparked a compromise offer from House Speaker Matt Ritter, also a Hartford Democrat, that Lamont described as interesting.
The speaker suggested borrowing as much as $200 million annually for the next decade to invest in urban centers.
But Fonfara, who is involved in final budget negotiations with the Lamont administration, hasn’t abandoned his own proposals.
At a recent press conference, he used Lamont’s own words to make his case for state tax reform.
Lamont’s proposal on how to spend the latest federal pandemic relief insists one key priority is “lifting up the communities in our state who not only were most adversely impacted by the COVID-19 pandemic in 2020 and 2021, but have historically faced inequities in the areas of health, opportunity, and education.”
After reading those words, Fonfara added his own.
“Two years of federal funding in American Rescue Plan funds, as substantial as they are, are not sufficient nor sustained to address the system challenges we face as a state,” he said, adding Connecticut must put its own resources to work and realign how much each household contributes. “The status quo policy will produce status quo results.”